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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Silk Road Medical, Inc. (NASDAQ:SILK).
Is SILK a good stock to buy? Silk Road Medical, Inc. (NASDAQ:SILK) investors should pay attention to a decrease in hedge fund interest in recent months. Silk Road Medical, Inc. (NASDAQ:SILK) was in 21 hedge funds' portfolios at the end of March. The all time high for this statistic is 27. Our calculations also showed that SILK isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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Do Hedge Funds Think SILK Is A Good Stock To Buy Now?
At Q1's end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the fourth quarter of 2020. On the other hand, there were a total of 12 hedge funds with a bullish position in SILK a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Matrix Capital Management held the most valuable stake in Silk Road Medical, Inc. (NASDAQ:SILK), which was worth $27.3 million at the end of the fourth quarter. On the second spot was Deerfield Management which amassed $24.7 million worth of shares. Perceptive Advisors, Armistice Capital, and Rhenman & Partners Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Deerfield Management allocated the biggest weight to Silk Road Medical, Inc. (NASDAQ:SILK), around 0.52% of its 13F portfolio. Rhenman & Partners Asset Management is also relatively very bullish on the stock, dishing out 0.52 percent of its 13F equity portfolio to SILK.
Judging by the fact that Silk Road Medical, Inc. (NASDAQ:SILK) has witnessed falling interest from the smart money, it's easy to see that there was a specific group of funds that slashed their positions entirely heading into Q2. Interestingly, Jerome Pfund and Michael Sjostrom's Sectoral Asset Management said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $25.2 million in stock. Efrem Kamen's fund, Pura Vida Investments, also sold off its stock, about $6.2 million worth. These moves are interesting, as aggregate hedge fund interest fell by 6 funds heading into Q2.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Silk Road Medical, Inc. (NASDAQ:SILK) but similarly valued. We will take a look at Kymera Therapeutics, Inc. (NASDAQ:KYMR), Evolent Health Inc (NYSE:EVH), NBT Bancorp Inc. (NASDAQ:NBTB), Monmouth Real Estate Investment Corp. (NYSE:MNR), Sapiens International Corporation N.V. (NASDAQ:SPNS), Scholar Rock Holding Corporation (NASDAQ:SRRK), and Provident Financial Services, Inc. (NYSE:PFS). This group of stocks' market valuations are closest to SILK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KYMR,16,346189,1 EVH,22,344398,4 NBTB,6,10908,-5 MNR,13,58825,1 SPNS,12,46366,-2 SRRK,14,170425,0 PFS,11,24090,0 Average,13.4,143029,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.4 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $118 million in SILK's case. Evolent Health Inc (NYSE:EVH) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 6 bullish hedge fund positions. Silk Road Medical, Inc. (NASDAQ:SILK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SILK is 69.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately SILK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SILK were disappointed as the stock returned -10.1% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.